REAL ESTATE
GLOSSARY.
Clear meanings for the words behind your next move.
13 terms
- Appraisal
An independent opinion of a property’s value, usually prepared by a licensed or certified appraiser. A lender may use it to decide how much it is willing to lend.
An appraisal is not a home inspection. If the value is below the agreed price, discuss financing and contract options with your lender and agent.
- Closing
The final stage of a property purchase when documents are signed, funds are paid and ownership is transferred.
The exact process and timing vary by location and transaction.
- Closing costs
Fees and expenses paid to complete a home purchase or mortgage, separate from the down payment. They may include lender charges, title services, recording fees and taxes.
Review your Loan Estimate and Closing Disclosure. Prepaid insurance, interest and escrow deposits may also affect the cash you need at closing.
- Closing Disclosure
A document showing the final terms and costs of many U.S. home mortgages, including monthly payments and cash needed at closing.
Compare it with your Loan Estimate and ask your lender to explain changes or unfamiliar fees.
- Contingency
A condition in a purchase contract that must be met for the transaction to proceed as agreed, such as financing, inspection or appraisal.
Your ability to cancel and recover a deposit depends on the contract, deadlines and local law.
- Down payment
The part of the purchase price you pay from your own funds rather than financing through a mortgage.
It is different from closing costs. Required amounts depend on the loan program and your circumstances.
- Earnest money
A deposit a buyer makes to show commitment to a purchase after an offer is accepted. It is typically held by a third party and credited toward the purchase at closing.
It is not automatically refundable. The contract, contingencies, deadlines and local law determine what happens if the sale falls through.
- Equity
The difference between a property’s current value and the amount owed on loans secured by it.
Equity can rise or fall as property values and loan balances change. It is not the same as cash available to spend.
- Escrow
An arrangement in which a third party holds money or documents until agreed conditions are met. A mortgage escrow account may also collect money for property taxes and insurance.
Purchase escrow and a lender’s ongoing escrow account serve different purposes.
- Home inspection
An examination of a home’s accessible condition and systems by an inspector to identify issues that may need attention.
It is not a valuation or a guarantee that every defect will be found. Specialized inspections may be needed.
- Loan Estimate
A document outlining the estimated terms, payments and closing costs for many U.S. home mortgages.
Compare offers for the same loan type and terms. An estimate is not a guarantee of approval or final costs.
- Preapproval
A lender’s conditional indication of how much it may be willing to lend after reviewing financial information.
It is not a final loan commitment. Approval can still depend on the property, updated documents and underwriting.
- Title insurance
Insurance against certain covered problems with a property’s ownership history, such as some undiscovered liens or competing ownership claims.
A lender’s policy protects the lender; an owner’s policy protects the buyer. Coverage and exclusions depend on the policy.